Rebuilding

Following natural disasters, how does the government respond? Where does the money come from, and aren’t there ways that we can be better prepared?

Early estimates are that the total cost of Harvey and Irma are $150-$250B. In perspective, the cost of Katrina was $160B. How do we pay for that? What are other economic factors that need to be considered?

The United States annual budget is roughly $3.8 trillion. So, those two hurricanes comprise approximately 5% of the annual budget.

When I worked in municipal government, I dealt with the Office of Management and Budget from time to time. Check how much overall was left for the office until the end of the fiscal year. Request transfers from one category to another. Those kind of things.

I’m neither an expert on budgets nor on government expenditures.

That being said, it seems that the Nation has a problem. Debt is required to make up the deficit in the budget (already), and more debt will be needed to pay for the damage.

Following Hurricane Katrina, John W. Schoen had this to say when asked who’d foot the bill: “The simplest answer: our children and grandchildren will get stuck with the bill. They’re the ones who will ultimately have to pay off the debt Congress has authorized to keep spending on the war in Iraq and now the rebuilding of damage caused by back-to-back hurricanes. In the short-term, the cash is coming from the sale of Treasury bonds, which will have to be paid back decades from now.”

I’d say great, but I’ll probably be alive to see my taxes increase for that. Probably won’t have Social Security benefits either.

Regardless, the question of handling national disasters comes down to the matter of handling the National Budget. And given that the Country was created partially through the borrowing of money (to finance the Revolutionary War), we have always been a people of debt.

The American Dream was founded on debt.

Is it sustainable? Probably not. Are we going to suddenly have to become a Chinese State? Highly doubtful. Still, planning for the budget deficit in responsible ways has become even more important in recent years.

The Treasury Department was cerated to handle the Country’s finances (thank you Alexander Hamilton – I’m a theatre guy, please keep that in mind).

From a website showing US Government Spending, we get these charts:

usgs_chart4p01

“When charted in dollars the total accumulation of federal debt looks huge. Looking back over the last century, the debt back in 1900 doesn’t really register.”

usgs_chart4p02

“But by charting accumulated debt as a percent of gross domestic product (GDP), you get a look at government debt compared to the size of the economy at the time.” This looks like a more reasonable time comparison, though having debt at 100% of the GDP is certainly not a desirable method of running the Nation’s finances.

So where does that leave us? Raise taxes? Cut spending? That’s the crux of the Democrat-Republican debate!

But in the short term it unfortunately doesn’t matter which side is right, if either side can actually be right. The cost of repair when destruction hits needs to be paid.

 

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